Tax Return - Payment on account refund query
Discussion
For 12-13 Lady B had a few K to pay in tax. As it was over a certain amount she had to pay a bit on account for 13-14 with another instalment due at the end of July.
Lady B has earned a bit less last tax year (13/14) so I'm doing her TR now and as a result is due a partial tax refund for tax paid on interest. However I can't see the payment on account made in January '14 in the calc. Does this get added later to her refund? Or is there somewhere on the tax return I have to put this figure?
Lady B has earned a bit less last tax year (13/14) so I'm doing her TR now and as a result is due a partial tax refund for tax paid on interest. However I can't see the payment on account made in January '14 in the calc. Does this get added later to her refund? Or is there somewhere on the tax return I have to put this figure?
Edited by Sir Bagalot on Thursday 19th June 00:10
Biglips said:
What is the threshold for having to make a POA? I am likely to be in a similar position over the next couple of tax years having a new self employed income in addition to my PAYE. Helpful to know how much to squirrel away! Many thanks.
From HMRC website - you have internet access?Payments on account - when do you need to pay them?
You may have to make payments on account towards the current year's tax.
You usually have to make these payments if the tax due for the previous year was over £1,000. But if more than 80% of this tax has already been collected at source, you won't have to make payments on account.
If you do make payments on account, you will make two payments. Each payment is half of the tax due for the previous year.
You must pay the first instalment by 31 January in the current year and the second by the following 31 July. For example, for the tax year 2013-14 (6 April 2013 to 5 April 2014) the first payment on account is due on 31 January 2014. The second payment on account is due on 31 July 2014.
Example - no payments on account are needed
Mr L's tax bill for the 2012-13 tax year was £1,200.
£1,000 of this tax had already been collected at source on his savings.
As the tax collected at source is more than 80% of the tax bill, Mr L won't have to make payments on account for the 2013-14 tax year.
He must pay any tax due for the 2013-14 tax year by the normal payment deadline of 31 January 2015.
Example - payments on account must be made
Mrs A completes her 2012-13 tax return and works out that she has £4,500 tax to pay for the year ending 5 April 2013. No tax has been collected at source.
She has already made two payments on account towards this amount - £2,000 in January 2013 and £2,000 in July 2013.
She must make a balancing payment of £500 by 31 January 2014.
Her payments on account for the 2013-14 tax year will be £2,250 each.
This is half of the tax that was due for 2012-13 (£4,500/2)
These payments are due on 31 January 2014 and 31 July 2014.
Perhaps it may be worthwhile investing in an accountant....
David
Biglips said:
I think so. So a simplistic approach as a higher rate tax payer is that I will not take any of my self employed earnings for 12 months to cover the income year tax liability plus the payment on account for the following year leaving about 20%. Does that sound correct?
The cashflows can be a bit of a challenge and may depend on what period your first accounts are prepared for - what period are they?BTW this should be easily explained by an accountant worth his salt so not sure why you didn't get it?
David
Yes it is the cash flow that is what concerns me as I expect to have a very good year this current tax year which is my first as self employed, but likely to have much less next year and beyond (approx 5 to10 fold less in subsequent years). I have resigned myself to not spending anything other than my PAYE earnings in my first 12 months and then see where I am. To be fair to the accountant he did go over this but I didn't take it in having only ever had PAYE for the last 20+ years.
Thank you for the info it is appreciated
Thank you for the info it is appreciated
As I mentioned earlier - if you are aware that that your Self Assessment income for the next year is less than the previous, you can estimate the likely tax arising and apply to have the relevant Payments on Account reduced.
Again, an accountant should -
a) have advised you of this option
b) assisted you in calculating whether applying to reduce the Payments on Account is a worthwhile thing to consider
Again, an accountant should -
a) have advised you of this option
b) assisted you in calculating whether applying to reduce the Payments on Account is a worthwhile thing to consider
It is just a bit difficult to estimate future income at the moment in what is a fledgeling enterprise but I guess it will become apparent as time goes by. Now that I know I can put less on account if necessary that is useful. Fortunately this is additional income that I don't need for day to day expenses. In a way it will be an enforced way of saving. Many thanks for this clear and helpful advice
So is your first trading period to 31 March 2015?
If so, all the tax (and Class 4 NIC) on that first year being tax year 2014/15 will be due 31 January 2016 together with the first payment on account for 2015/16 which normally would be 50% of that amount.
However, as Eric says above, you can make a claim to reduce this to half of the anticipated liability for the year.
David
If so, all the tax (and Class 4 NIC) on that first year being tax year 2014/15 will be due 31 January 2016 together with the first payment on account for 2015/16 which normally would be 50% of that amount.
However, as Eric says above, you can make a claim to reduce this to half of the anticipated liability for the year.
David
sumo69 said:
From HMRC website - you have internet access?
Payments on account - when do you need to pay them?
You may have to make payments on account towards the current year's tax.
You usually have to make these payments if the tax due for the previous year was over £1,000. But if more than 80% of this tax has already been collected at source, you won't have to make payments on account.
If you do make payments on account, you will make two payments. Each payment is half of the tax due for the previous year.
You must pay the first instalment by 31 January in the current year and the second by the following 31 July. For example, for the tax year 2013-14 (6 April 2013 to 5 April 2014) the first payment on account is due on 31 January 2014. The second payment on account is due on 31 July 2014.
Example - no payments on account are needed
Mr L's tax bill for the 2012-13 tax year was £1,200.
£1,000 of this tax had already been collected at source on his savings.
As the tax collected at source is more than 80% of the tax bill, Mr L won't have to make payments on account for the 2013-14 tax year.
He must pay any tax due for the 2013-14 tax year by the normal payment deadline of 31 January 2015.
Example - payments on account must be made
Mrs A completes her 2012-13 tax return and works out that she has £4,500 tax to pay for the year ending 5 April 2013. No tax has been collected at source.
She has already made two payments on account towards this amount - £2,000 in January 2013 and £2,000 in July 2013.
She must make a balancing payment of £500 by 31 January 2014.
Her payments on account for the 2013-14 tax year will be £2,250 each.
This is half of the tax that was due for 2012-13 (£4,500/2)
These payments are due on 31 January 2014 and 31 July 2014.
Perhaps it may be worthwhile investing in an accountant....
David
A few years ago hmrc had some adverts that claimed 'tax does not have to be taxing' It was not straight forward then and it has not got easier since!Payments on account - when do you need to pay them?
You may have to make payments on account towards the current year's tax.
You usually have to make these payments if the tax due for the previous year was over £1,000. But if more than 80% of this tax has already been collected at source, you won't have to make payments on account.
If you do make payments on account, you will make two payments. Each payment is half of the tax due for the previous year.
You must pay the first instalment by 31 January in the current year and the second by the following 31 July. For example, for the tax year 2013-14 (6 April 2013 to 5 April 2014) the first payment on account is due on 31 January 2014. The second payment on account is due on 31 July 2014.
Example - no payments on account are needed
Mr L's tax bill for the 2012-13 tax year was £1,200.
£1,000 of this tax had already been collected at source on his savings.
As the tax collected at source is more than 80% of the tax bill, Mr L won't have to make payments on account for the 2013-14 tax year.
He must pay any tax due for the 2013-14 tax year by the normal payment deadline of 31 January 2015.
Example - payments on account must be made
Mrs A completes her 2012-13 tax return and works out that she has £4,500 tax to pay for the year ending 5 April 2013. No tax has been collected at source.
She has already made two payments on account towards this amount - £2,000 in January 2013 and £2,000 in July 2013.
She must make a balancing payment of £500 by 31 January 2014.
Her payments on account for the 2013-14 tax year will be £2,250 each.
This is half of the tax that was due for 2012-13 (£4,500/2)
These payments are due on 31 January 2014 and 31 July 2014.
Perhaps it may be worthwhile investing in an accountant....
David
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